1. The History of Managed Care Organizations in the United States
Presentation Developed for the Academy of Managed Care Pharmacy
Updated May 2017

2. Topics Covered History of Managed Care
Introduction to Managed Care Organizations

3. What is Managed Care?
An organized way to deliver healthcare services by efficiently utilizing healthcare resources to provide quality patient care
Managed care principles have been used for over 100 years in the U.S.
The major goals of managed care include:
Improve quality and accessibility of health care
Improve outcomes and overall quality of life for patients
Provide cost-effective care

4. *In the Beginning…
1929
Dr. Justin Ford Kimball at Baylor Hospital in Texas establishes The Baylor Plan, a prepaid hospitalization plan that first uses the Blue Cross logo
1938
Henry J Kaiser recruits Dr. Garfield to establish prepaid clinic and hospital care for his Grand Coulee Dam project in Washington
1939
Blue Shield program adopted for participating prepaid physician plans
1945
Group Health Cooperative of Puget Sound established in Seattle, WA
Permanente Health Plans opens to the public in California, in addition to serving Kaiser employees
1947
Health Insurance Plan (HIP) of Greater NY established to serve NY city employees
1952
Permanente Health Plans changes name to Kaiser, while medical group retains Permanente name. Kaiser membership at 250,000
*Adapted from the website:

5. *Developing in the healthcare marketplace
1973
HMO Act of 1973 signed into law by President Nixon, using federal funds and policy to promote HMOs
1982
California legislation enacted allowing selective contracting for Medicaid and private insurance, paving the way for other states to enact similar laws facilitating Preferred Provider Organizations (PPOs)
1990
National total HMO enrollment reaches 33.3 million
National PPO enrollment surpasses HMO enrollment with 38.1 million members
NCQA established
1996
Health Insurance Portability & Accountability Act of 1996 (HIPAA) includes patient privacy compliance and health plan portability provisions
2000
National total HMO enrollment is 80.9 million, declining for the first time from the previous year's level (81.3 million in 1999)
*Adapted from the website:

6. *Developing in the healthcare marketplace
2003
Medicare Modernization Act establishes Part D drug benefit, establishes HSAs, renames Medicare+Choice program to Medicare Advantage and increases payment rates to Medicare Advantage plans
2004
National total HMO enrollment is 68.8, and national PPO enrollment is 109 million
2006
National total HMO enrollment is 67.7, and national PPO enrollment is 108 million
Medicare Part D prescription benefit becomes effective
2010
Affordable Care Act (ACA) is approved by Congress and signed into law, including provisions to allow increased access to healthcare for Americans, creates incentives focused on quality, and changes certain payment systems to reward value
*Adapted from the website:

7. *Developing in the healthcare marketplace
2011
Final rule for Accountable Care Organizations (ACOs) released by CMS to create incentives for health care providers to better coordinate care
CMS established the Shared Savings Program to reward ACOs who lower growth of health care costs while meeting quality of care standards
2012
Affordable Care Act (ACA) upheld by Supreme Court
2013
Medicare ACOs in 49 states
Open enrollment in the Health Insurance Marketplace begins
2014
Coverage begins under plans purchased in the Health Insurance Marketplace.
2015
Medicare Access and CHIP Reauthorization Act of 2015 becomes law to revise physician payment to focus on quality and outcomes
2017
Congress and Administration consider changes to marketplace plans in ACA
*Adapted from the website:

8. What is a Managed Care Organization (MCO)?
Many use the terms MCO and health plans interchangeably to describe a managed care delivery system
MCOs include:
Managed Medicaid and Medicare programs
Employer-offered commercial insurance plans
Departmen tof Defense TRICARE programs
Integrated delivery systems and ACOs
Focus continues to be on controlling costs by controlling supply and demand of all healthcare resources
Utilize an array of cost management strategies to influence cost-effective decisions
Most common types of MCOs include Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs)

9. What is a Health Maintenance Organization (HMO)?
Allegedly coined by Paul Ellwood, MD
Focus of the delivery system was on:
Wellness
Health prevention
Comprehensive acute and chronic care
Today, HMOs and other group health insurers allow for insured individuals to not have to pay cash from their personal funds for all of their healthcare needs
Offer medical and/or prescription coverage
Instead of a self-paying, insured individuals may pay a deductible, copay, or coinsurance for covered services delivered.
To receive coverage, many individuals have to pay a monthly premium (for some employed individuals the employer pays for a portion of the premium). Premiums, copays and coinsurances are used to share the financial risk with the insured individual in an effort to encourage the individuals to use only what is needed.

10. Covered Pharmacy Benefit
Many MCOs offer a prescription drug plan as part of the healthcare benefits
Prescription medications are essential in preventing and treating a wide variety of acute and chronic conditions
Prescription drug plans manage formularies and use utilization management tools and cost-sharing to manage prescription costs
Utilization management tools include
Prior Authorization
Step Therapy
Quantity Limits

11. References
Navarro, Robert P. Managed Care Pharmacy Practice. 2nd ed. Sudbury, MA: Jones and Bartlett, 2009.
Managed Care Museum. Timeline. Modesto, CA: Managed Care Museum. Accessed on: May 1,
U.S. Department of Health and Human Services. About the ACA. Accessed on: May 1,